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Marketing budgets under threat as finance directors tighten screws – WFA and Ebiquity

Finance directors are putting marketing and advertising budgets under heavy scrutiny as companies across the world face a volatile and unpredictable marketplace, according to new research from the World Federation of Advertisers (WFA) and Ebiquity.

The new study assessed the intentions of 43 multinational companies. The sample included five of the world’s top 10 advertisers by spend, which collectively invest more than $44bn in advertising.

Just under a third (29%) plan to reduce spend in 2023, with the same proportion claiming they will invest more next year. Four in 10 say they will maintain their budgets at 2022 levels. Three quarters of the sample “agree strongly” or “agree” that 2023 budgets are under heavy scrutiny, with marketers required to justify investment.

Regional differences

There is more evidence of a potential cut in spend in EMEA compared with APAC. In EMEA a third of respondents agree there could be a significant (more than 10%) or slight decrease (0-10%) next year, compared to 30% who are planning a slight increase in spend. By contrast, in Asia Pacific just 15% envisage a slight decrease while 35% plan a slight increase.

Shift to short-term

The big change in behaviour seen in the research is a different emphasis in the way that money will be allocated next year, with greater emphasis on short-term, performance marketing. Twenty-eight per cent of respondents say they will seek to boost performance, compared to 21% who are focused on increased brand spend in 2023.

The big winner will be digital, with 42% saying they will increase spend either slightly or significantly, with offline media such as TV, radio, print, and outdoor likely to suffer. Nearly half of respondents are planning to cut offline investment and a quarter are looking to make a significant cut (of more than 10%) in print spend.

Increasing flexibility

The other major change is the move towards more flexibility in investment. This means greater use of biddable/auction-based platforms on digital channels. This lets brands hold back funds. Fewer than one in 10 respondents (9%) are planning to increase the proportion of budget allocated to upfront commitments.

“It is encouraging to see that a number of clients are planning on standing firm and taking heed of the well-taught lessons of previous recessions, which show time and again that those who continue to invest or increase their ad spend emerge stronger from periods of economic uncertainty,” says WFA CEO Stephan Loerke, a touch optimistically.

Ebiquity group CEO Nick Waters says: “As brands are required to achieve more with less in 2023 to optimise the value of their investments, it makes sense to review expenditure and cut ineffective and wasteful spend first.

“Sustaining investment is one thing, but there is a risk to long-term brand health by over-investing at the bottom of the purchase funnel. It is a natural instinct to want to see immediate results from media investment but the longer-term trade off needs to be weighed carefully. It becomes more expensive to re-build brand credentials once they have slipped.”

Grim news then for advertising as we used to know it but hardly unexpected with the world short on energy, high on inflation and some countries (like the UK) in danger of running out of money as investors force up the price of debt.

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